Rivian Is 'Executing Where It Matters Most': 4 Analysts Size Up Improving Gross Margins, 50K Vehicle Guidance — And That Amazon Relationship

Electric vehicle company Rivian Automotive Inc RIVN reported first-quarter financial results that saw revenue and earnings per share both beat estimates from analysts.

Here’s a look at what analysts are saying after the report.

The Rivian Analysts: Truist Securities analyst Jordan Levy had a Buy rating and a price target of $28.

RBC Capital Markets analyst Tom Narayan had a Sector Perform rating and a price target of $14.

Cantor Fitzgerald analyst Andres Sheppard had an Overweight rating and a price target of $27.

Needham analyst Chris Pierce had a Buy rating and a price target of $26.

Related Link: Trading Strategies For Rivian Stock After Q1 Earnings 

The Analyst Takeaways: Truist Securities' Levy said the first quarter results showed Rivian was “executing where it matters most.”

“RIVN’s 1Q results in our view demonstrated continued strong execution in ramping volumes, rolling out new tech, and perhaps most importantly driving down costs,” Levy said.

The analyst said gross margin losses per vehicle were cut in the quarter despite commercial deliveries being impacted. The company reiterated positive gross margins by fiscal 2024.

“RIVN reiterated its 50k vehicle production guide for FY23, as we continue to see ramping volumes as the biggest lever the company has to improve its margin profile, along with continued cost reduction efforts.”

The analyst also noted Rivian mentioned ongoing discussions with Amazon.com, Inc. AMZN over its exclusivity for commercial vehicles. Amazon is an investor in the company and has ordered commercial vehicles under an exclusive deal that lasts into 2026.

“We would view an agreed upon elimination of exclusivity as a meaningful positive for RIVN allowing the company to expand its EDV efforts to long-tail smaller commercial fleet customers.”

RBC Capital Markets' Narayan called Rivian a “show me story.” The analyst said the company beat results for the first quarter but maintained current guidance, which could mean a downshift is coming.

“Management presented a compelling case to improve profitability, but we worry about intensifying competition from well-capitalized incumbents starting to launch similar BEVs this year,” Narayan noted.

The analyst said estimates could move higher for 2023 from other analysts, but the math suggested numbers could end up weaker through the end of the year.

“We believe the downshift is coming from higher volumes which are coming at negative EBITDA.”

The analyst said 20% of revenue in the first quarter came from Amazon and the company is planning to pursue other OEMS for future commercial vehicles.

Cantor Fitzgerald's Sheppard said Rivian produced 24,337 vehicles in 2022 versus guidance of 25,000. The analyst saw the company coming close to the 2023 guidance of 50,000 with a base case of 49,750.

“We also model the company producing 94,525 vehicles and delivering 86,585 in 2024E. We expect these can translate into $3.8B and $7.4B in sales for 2023E and 2024E, respectively,” Shappard said.

The analyst said the company’s commitment to gross margins improving gradually as production ramps and hitting positive figures in 2024 was an important item in the financial results.

“More importantly, management reaffirmed during its 1Q call that it believes its current liquidity position is sufficient to fund the company ‘through 2025.’”

The analyst said Rivian benefits from having Amazon as a strong partner, calling it a “significant differentiator.”

Sheppard added Rivian could eventually open its charging network in 2024, which would make the company eligible for increased federal funds.

Needham's Pierce said his confidence in longer-term estimates increased after the first quarter results.

“RIVN reiterated production and adj EBITDA guidance for the full year, which strikes us as conservative, but the right move given multiple expectation resets lower in ’22,” Pierce said.

The analyst said Rivian checked three boxes for the quarter with increased scale, demand and improving vehicle margins.

“Annual vehicle production reiterated, a known positive but a net positive given negative revisions in ’22.”

The analyst said Rivian was seeing strong demand, including with 60% of R1T buyers never owning a pickup truck previously and 75% of Rivian buyers making a vehicle from the company their first electric vehicle owned.

RIVN Price Action: Rivian shares are up 6.07% to $14.68 on Wednesday.

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Photo: Courtesy Rivian